Lenders cut off the home-equity tap - Page 5 - Mercedes-Benz Forum

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post #41 of 48 (permalink) Old 02-28-2008, 01:22 PM
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Re-read post 32. It explains.
I was right! Definitely a brain fart!!

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post #42 of 48 (permalink) Old 02-28-2008, 02:03 PM
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Just the facts.
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post #43 of 48 (permalink) Old 02-28-2008, 08:50 PM
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I agree with the sentiment. What I find that differentiates SOME of these loans is that the banks took folks who were in homes they could afford, loaded up the equity to 120-150% of the value of the house and pushed these low teaser rates really hard. For folks like anyone on this board, we would have ZERO excuse as we are able to follow the math, understand the risk/reward and make the assessment based on that. The reason so many banking and mortgage officers are being investigated and indited is due to to type of folks they chose to target for their loans.

The idea was make the loan, tuck the loan into a portfolio, sell the portfolio, hedgefund buys the portfolio backed by bond ratings on the assumption that the original loan was credit checked, inspected and vetted which often was not the case. Essentially, everyone got a piece of a pie that kept being pushed forward without anyone checking to see if the pie was good.

Sometimes the owner knew they were getting a great 125% deal, pushing the envelop, sometimes they did not have a clue in the world. They just thought they were getting their hospital bills paid off and trusted their banker like they always had. They didn't know the rules had changed.
I agree with GS, I feel no obligation to bail out anyone. What you describe above is the loaner and/or loanee failed to do their due diligence and will suffer for it, as they should. The people whose fault it is should bear the burden, not me. And it is the fault of the loanee if they got in over their heads, no matter how seductive the sales pitch. It is telling you threw in the hospital bill example, as it is more likely a plasma TV.

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post #44 of 48 (permalink) Old 02-28-2008, 09:38 PM
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I agree with GS, I feel no obligation to bail out anyone. What you describe above is the loaner and/or loanee failed to do their due diligence and will suffer for it, as they should. The people whose fault it is should bear the burden, not me. And it is the fault of the loanee if they got in over their heads, no matter how seductive the sales pitch. It is telling you threw in the hospital bill example, as it is more likely a plasma TV.
In my "economic" opinion we failed the second we started bailing out the system, period. We should have let the the system that was in place do its job and the problems would not have come to where they are.

That said, we failed as a Government to appropriately regulate the financial sector to insure that is was maintaining fiduciary responsibility [yes, that is one of the legislated roles of our federal government]. We allowed institutions to make loans that they legally should not have been allowed to make, many without verification of employment or income, many without inspection of property and many without proper checks and balances we expect of financial institutions.

It was not all their fault, many borrowers used their home equity as an ATM. Many refi'ed every February to clear up the credit card addiction. Many bought into the "everything is roses economy" that was being broadcast on advertiser based TV. They FAILED also.

The problem now is that you have a snowball that is so large that unless something is done, the result is worse than the "let them suck it up" answer because while the financial sector will collapse and millions of homeowners will lose their homes, the cascade effect will be staggering if nothing is done to soften the landing.

Is it the "right" thing to do for those of us who have no debt and paid attention and did the right thing and now have to cover another bailout like the Savings and Loan or HMO failures? NO. But the recession and its aftermath if we do nothing will cost us much more. And that is the conundrum.

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post #45 of 48 (permalink) Old 02-28-2008, 10:26 PM
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In my "economic" opinion we failed the second we started bailing out the system, period. We should have let the the system that was in place do its job and the problems would not have come to where they are.

That said, we failed as a Government to appropriately regulate the financial sector to insure that is was maintaining fiduciary responsibility [yes, that is one of the legislated roles of our federal government]. We allowed institutions to make loans that they legally should not have been allowed to make, many without verification of employment or income, many without inspection of property and many without proper checks and balances we expect of financial institutions.

It was not all their fault, many borrowers used their home equity as an ATM. Many refi'ed every February to clear up the credit card addiction. Many bought into the "everything is roses economy" that was being broadcast on advertiser based TV. They FAILED also.

The problem now is that you have a snowball that is so large that unless something is done, the result is worse than the "let them suck it up" answer because while the financial sector will collapse and millions of homeowners will lose their homes, the cascade effect will be staggering if nothing is done to soften the landing.

Is it the "right" thing to do for those of us who have no debt and paid attention and did the right thing and now have to cover another bailout like the Savings and Loan or HMO failures? NO. But the recession and its aftermath if we do nothing will cost us much more. And that is the conundrum.
Well said.


Greedy irresponsible lenders and stupid "homeowners" using their homes like an ATM for plasma TVs, Boats, RVs, Jet skis, cruise vacation trips and other trash expenses they can do without but advertisers insisted they have to have....

And now WE are expected to pay for all this $hit.

Jim
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"I swear to god, it's like I live in a trailer of common sense, and stare out the window at a tornado of stupidity." >'='<
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post #46 of 48 (permalink) Old 02-29-2008, 02:12 AM
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OR, prices can be left to adjust themselves, without this continuous and counterproductive meddling. That means prices will come down for a lot of things, not just residential real estate. And then miracle of miracles, the economy will adjust. And so will we. Why on earth should there not be pain? We've earned a lot of pain.

Why should those who earn and save be the ones who are punished?
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post #47 of 48 (permalink) Old 02-29-2008, 09:44 AM
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OR, prices can be left to adjust themselves, without this continuous and counterproductive meddling. That means prices will come down for a lot of things, not just residential real estate. And then miracle of miracles, the economy will adjust. And so will we. Why on earth should there not be pain? We've earned a lot of pain.

Why should those who earn and save be the ones who are punished?
Right now the current bond rates [for those who don't like the volatility of the stock market] is somewhere around 3&#37; or less. Which is a shame for folks who want to be able to have secure, safe savings. It is as if the sector, and the government want everyone in the higher risk stock market or nothing.

So folks who have been plodding along for decades with bonds, accumulating their retirement and personal wealth are now in a position of being screwed as rates go to the cellar.

As for prices coming down on lots of other items, I don't see much of that happening. Houses yes, because there is a barter value to them. But most items we buy, from TVs to toasters to underwear to chairs that have certain fixed cost associated with its manufacture. IF we were still manufacturing here in the US you could easily argue that you simply move offshore for the manufacturing but that has already occurred. Costs for many products, from materials to labor are already at third world prices.

I can see a sharp reduction in the number of upper level automobiles sold. That would be a solid first sign of belt tightening. Folks moving from Lexus to Avalon, Acura back to Accord, Caddy to Buick. And I would expect some of the 12 DVD and full massage systems for the little snowflakes options to start coming off the check list.

As for the "the market can be left to adjust itself". True enough except if banks start to falter the FDIC comes into play [remember S&L] and the government has to write a much bigger check.

McBear,
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Last edited by mcbear; 02-29-2008 at 09:47 AM.
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post #48 of 48 (permalink) Old 02-29-2008, 11:38 PM
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It's not just yields that are screwing savers, it's inflation.

Still, if people stop buying things, I can't see how prices will be supported. The Fed frenzy is all about propping up prices. Might not even work, in the end.
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